Category: Mortgages

Categories
Mortgages

What Mortgage Underwriters Look for First
(And How to Prep Before You Apply)

INTRODUCTION

For many homebuyers, the word “underwriter” feels intimidating. It’s often associated with delays, conditions, or last-minute requests for documents. But underwriting isn’t meant to be a roadblock—it’s a safeguard.

Mortgage underwriters are responsible for making sure a loan meets lending guidelines and that the borrower has the ability to repay it over time. Their job isn’t to find reasons to deny you, but to verify that the loan makes sense on paper.

Understanding what underwriters look for first can dramatically reduce stress and prevent surprises. In this guide, we’ll break down the underwriting process in clear, simple terms and explain how you can prepare before you ever apply.

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WHAT IS A MORTGAGE UNDERWRITER?

A mortgage underwriter is the professional who reviews your financial information and determines whether a loan meets approval guidelines.

They review:
• Income documentation
• Credit history
• Assets and reserves
• Existing debts
• Property details

Underwriters work within established rules, but they also use judgment. Their goal is consistency and clarity—not perfection.

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WHAT UNDERWRITERS REVIEW FIRST (IN ORDER)

Although every file is unique, most underwriters review applications in a similar sequence.

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INCOME STABILITY

The first thing underwriters evaluate is whether your income is stable and likely to continue.

They ask:
• Is the income consistent?
• Is it likely to continue for at least three years?
• Is it documented properly?

W-2 income is generally straightforward. Self-employed, commission, or bonus income requires deeper review.

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DEBT-TO-INCOME RATIO (DTI)

Next, underwriters evaluate how much of your income is already committed to debt.

They calculate your DTI by dividing total monthly debt by gross monthly income.

Even borrowers with strong income can face issues if monthly obligations are too high.

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CREDIT PROFILE (NOT JUST SCORE)

Credit score matters, but it’s not the only thing underwriters look at.

They also review:
• Payment history
• Late payments
• Collections or charge-offs
• Recent credit inquiries

A slightly lower score with strong payment history can be more favorable than a higher score with recent issues.

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ASSETS AND SOURCE OF FUNDS

Underwriters must verify that funds for down payment and closing costs are legitimate and accessible.

They look for:
• Sufficient balances
• Seasoned funds
• Clear paper trail

Large or unusual deposits often trigger questions.

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EMPLOYMENT AND CONSISTENCY

Employment is reviewed for continuity.

Job changes aren’t always a problem, but changes in pay structure or industry can require explanation.

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COMMON UNDERWRITING RED FLAGS

Certain issues consistently slow down underwriting.

These include:
• Large unexplained bank deposits
• Frequent job changes
• New credit accounts opened mid-process
• Significant changes in income
• Incomplete documentation

Most red flags can be resolved with preparation and communication.

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HOW TO PREP BEFORE YOU APPLY

Preparing before you apply can dramatically improve your experience.

Helpful steps include:
• Avoiding major financial changes
• Organizing income documents
• Reviewing bank statements for unusual activity
• Paying down small debts if possible

Early preparation reduces stress later.

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WHAT THIS MEANS FOR HOMEBUYERS

Underwriting isn’t about judgment—it’s about verification.

When buyers understand what underwriters look for, they’re better equipped to avoid delays and maintain momentum toward closing.

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FREQUENTLY ASKED QUESTIONS

Do underwriters verify employment more than once?
Yes. Employment is often re-verified before closing.

Can underwriters deny a loan after pre-approval?
Yes, if financial circumstances change or documentation cannot be verified.

How long does underwriting take?
Timelines vary, but preparation helps reduce delays.

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FINAL THOUGHTS

Mortgage underwriting doesn’t have to be intimidating. By understanding what underwriters look for and preparing early, you can move through the process with confidence and clarity.

Education and preparation are the strongest tools you have.

Categories
Mortgages

How Mortgage Approval Really Works in 2026
(From Application to Clear to Close)

INTRODUCTION

Mortgage approval is often described as stressful, confusing, or overwhelming—but it doesn’t have to be. Much of the anxiety buyers feel comes from not knowing what lenders are actually looking for or when decisions are being made.

In 2026, mortgage approval is not about having perfect credit, flawless finances, or unlimited savings. Instead, lenders are focused on clarity, consistency, and predictability. They want to understand how you earn money, how you manage debt, and whether your financial situation is likely to remain stable after you buy a home.

This guide is designed to walk you through the mortgage approval process in plain language. Whether you are a first-time buyer, moving up to a new home, or purchasing again after a major life change, understanding how approval works can help you avoid surprises and feel more confident throughout the process.

By the end of this guide, you’ll understand:
• What happens at each stage of approval
• What underwriters really look for
• Why delays happen
• How to prepare months before applying

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STEP 1: THE MORTGAGE APPLICATION — CREATING A CLEAR FINANCIAL STORY

When you apply for a mortgage, you are doing much more than filling out a form. You are presenting a financial story that underwriters will review carefully.

Lenders evaluate four main areas:

Income – how much you earn and how consistent it is
Assets – savings, checking, and available funds
Credit – how you’ve managed debt in the past
Liabilities – monthly obligations you already have

The goal is not to judge your financial choices, but to determine whether your income and assets reasonably support the loan you are requesting.

One of the most common mistakes buyers make is rushing through the application. Inaccurate information, missing documents, or unexplained discrepancies often lead to follow-up requests later. Taking time upfront to be thorough can save weeks in underwriting.

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STEP 2: PRE-QUALIFICATION VS PRE-APPROVAL — UNDERSTANDING THE DIFFERENCE

Pre-qualification and pre-approval are often used interchangeably, but they are very different.

Pre-qualification is usually based on information you provide verbally or through an online form. It gives a rough estimate of affordability but does not involve document verification.

Pre-approval, on the other hand, is based on reviewed documentation and a credit check. It tells sellers and agents that a lender has already evaluated your financial profile.

In competitive markets, pre-approval carries significantly more weight. Buyers who rely on pre-qualification alone are more likely to encounter surprises once underwriting begins.

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STEP 3: AUTOMATED UNDERWRITING — THE FIRST RISK ASSESSMENT

After submission, your loan is run through an automated underwriting system. This system compares your information to lending guidelines and risk models.

Possible results include:
Approve/Eligible – strong profile with standard conditions
Refer/Eligible – additional review or documentation needed
Refer/Ineligible – issues must be addressed before proceeding

This step helps lenders identify potential concerns early, but it does not replace human underwriting.

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STEP 4: DEBT-TO-INCOME RATIO — WHY MONTHLY PAYMENTS MATTER

Debt-to-income ratio (DTI) measures how much of your monthly income is already committed to debt payments.

Included debts:
• Credit cards
• Auto loans
• Student loans
• Personal loans
• Proposed mortgage payment

Even borrowers with strong credit can struggle with approval if monthly obligations are too high. Often, reducing small debts can meaningfully improve DTI and approval odds.

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STEP 5: INCOME VERIFICATION — STABILITY OVER PERFECTION

Income verification is one of the most important aspects of mortgage approval.

For W-2 employees, lenders look for consistent employment and predictable earnings. Overtime, bonuses, and commissions may count if they are documented and consistent over time.

For self-employed or 1099 borrowers, underwriters focus on taxable income reported on tax returns. While cash flow may feel strong, deductions and write-offs reduce qualifying income.

The key is stability—not perfection.

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STEP 6: ASSETS AND SOURCE OF FUNDS — MAKING SENSE OF YOUR SAVINGS

Lenders must verify not only that funds are available, but also where they came from.

Bank statements are reviewed to confirm:
• Down payment funds
• Closing cost funds
• Required reserves

Large deposits, gift funds, or transfers often require explanation. Preparing documentation early can prevent unnecessary delays.

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STEP 7: UNDERWRITING CONDITIONS — A NORMAL PART OF THE PROCESS

Most mortgage approvals come with conditions. These are requests for clarification, updated documents, or missing information.

Conditions do not mean something is wrong. They simply reflect the underwriter completing due diligence.

Responding quickly and clearly helps keep timelines on track.

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STEP 8: APPRAISAL AND TITLE — REVIEWING THE PROPERTY

While underwriting reviews the borrower, appraisal and title review the property.

The appraisal confirms that the home’s value supports the loan amount. Title review ensures legal ownership and identifies any liens.

If the appraisal comes in low, options may include renegotiation, additional funds, or loan restructuring.

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STEP 9: FINAL VERIFICATIONS — BEFORE THE FINISH LINE

Before closing, lenders often re-verify employment and may review credit again.

This step ensures that nothing significant has changed since approval. Maintaining financial consistency is critical during this phase.

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STEP 10: CLEAR TO CLOSE — WHAT IT REALLY MEANS

Clear to close means underwriting is complete and the loan is approved for closing.

While funds are not disbursed yet, this is the final approval stage before signing closing documents.

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COMMON REASONS APPROVALS GET DELAYED OR DENIED

Most issues stem from:
• Unexplained deposits
• Income inconsistencies
• Credit changes mid-process
• Misunderstanding documentation requirements

Most of these issues are preventable with preparation and communication.

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FREQUENTLY ASKED QUESTIONS ABOUT MORTGAGE APPROVAL

How long does mortgage approval take?
Approval timelines vary, but most approvals take several weeks depending on documentation and conditions.

Can I change jobs during the process?
Job changes can affect approval depending on income type and stability.

Will my credit be checked again?
Yes, lenders may re-check credit before closing.

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WHAT THIS MEANS FOR BUYERS

Understanding the approval process puts you in control. Buyers who know what lenders are looking for tend to experience fewer delays and less stress.

Preparing early allows you to focus on finding the right home rather than worrying about approval issues.

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FINAL THOUGHTS

Mortgage approval is not a mystery. It is a structured process built around clarity, consistency, and communication.

When you understand the steps and prepare ahead of time, the process becomes far less intimidating—and far more manageable.

Categories
Mortgages

Allowable and Non-Allowable Closing Costs Fees for VA Loans

Allowable and Non-Allowable Closing Costs Fees for VA Loans

As a service member or veteran looking to buy or refinance a home, VA loans are a great option to consider. VA loans are backed by the Department of Veterans Affairs and offer a range of benefits, including no down payment requirement, competitive interest rates, and more relaxed credit score requirements than traditional loans. However, like any other type of mortgage, VA loans come with closing costs, which can add up quickly. It’s important to understand which of these costs are allowable and which are non-allowable.

Allowable Closing Costs Fees:

Firstly, let’s discuss allowable closing costs fees for VA loans. Allowable closing costs are expenses that are considered necessary to complete the loan process. Here are the most common allowable closing costs fees for VA loans:

  1. Appraisal fee: This fee is charged by an appraiser to assess the value of the property you are purchasing or refinancing.
  2. Credit report fee: This fee covers the cost of obtaining your credit report and credit score.
  3. Origination fee: This fee is charged by the lender for processing and underwriting your VA loan.
  4. Recording fee: This fee is charged by the county or municipality to record the mortgage or deed of trust.
  5. Title search and title insurance: This fee covers the cost of searching public records to verify that the seller has the legal right to sell the property and insuring the title against any defects.
  6. VA funding fee: This fee is charged by the VA to help offset the cost of the loan program.
  7. Prepaid items, such as taxes and insurance: This includes property taxes, hazard insurance, and mortgage insurance premiums.
  8. Hazard insurance premium: This fee is charged to insure the property against damage from fire, flood, and other disasters.
  9. Flood zone determination fee: This fee covers the cost of determining whether the property is located in a flood zone.
  10. Survey fee: This fee covers the cost of having a professional survey the property to determine its boundaries and identify any encroachments.

Non-Allowable Closing Costs Fees:

Now, let’s take a look at non-allowable closing costs fees for VA loans. Non-allowable closing costs are expenses that are not considered necessary to complete the loan process. Here are the most common non-allowable closing costs fees for VA loans:

  1. Attorney fees: This fee covers the cost of hiring an attorney to review legal documents related to the VA loan.
  2. Brokerage fees: This fee covers the cost of hiring a mortgage broker to help you find a VA loan.
  3. Document preparation fees: This fee covers the cost of preparing legal documents related to the VA loan.
  4. Escrow fees: This fee covers the cost of setting up an escrow account to hold funds for property taxes and insurance.
  5. Notary fees: This fee covers the cost of having documents notarized.
  6. Postage and courier fees: This fee covers the cost of mailing or couriering documents related to the VA loan.
  7. Tax service fees: This fee covers the cost of having a third party verify your property tax payments.
  8. Underwriting fees: This fee covers the cost of having your loan application reviewed by an underwriter.

It’s important to note that while some of these costs are non-allowable for VA loans, they may still be necessary to complete the loan process. In these cases, the borrower will be responsible for paying these fees out of pocket. It’s also worth noting that the VA has a 1% cap on origination fees, so lenders cannot charge more than 1% of the loan amount as an origination fee.

If you’re a service member or veteran considering a VA loan, it’s important to do your research and understand the costs associated with the loan. Knowing which closing costs are allowable and non-allowable can help you budget accordingly and avoid any surprises down the line. If you have any questions or concerns about the cost of your VA loan, don’t hesitate to reach out to your lender for clarification.

At the end of the day, VA loans offer a range of benefits and can be a great option for those who qualify. By understanding the costs associated with the loan, you can make an informed decision about whether a VA loan is the right choice for you. So, if you’re considering a VA loan, take the time to review the allowable and non-allowable closing costs, and make sure to speak with your lender to get all the information you need to make the best decision for your situation.

Categories
Mortgages

Millennial Homeownership: A Deep Dive

Are Millennials Buying Homes?

It’s widely known that the millennial home-buying rate has been a little sluggish compared to earlier generations, but a positive shift in the housing market in recent years has allowed more millennials to buy homes. 

Trends show that millennial homeownership rates are rising quickly. According to the National Association of REALTORS®, millennial homebuyers account for 43% of the market—a 37% increase from the previous year—and they’re nearing the home-buying rates of baby boomers and Gen X as their generation continues to mature. Though current trends favor hopeful millennial homebuyers, not every millennial can make strides toward their homeownership goals.

Millennial Homeownership: What Are the Roadblocks?
Student Loan Debt

Higher education has never been more expensive than it is today, and high tuition rates have wreaked havoc on millennials’ homeownership opportunities. With constant tuition hikes and increasing inflation, countless millennials turn to student loans to fund their futures. For many millennials, the impacts of student loans on their home-buying potential have been crippling. 

Around 83% of millennials who don’t own their home cite student loan debt as the greatest barrier to homeownership. Why? Because student loans negatively affect homebuyers’ saving potential, ability to meet monthly mortgage payments, and even the ability to qualify for a mortgage due to higher debt-to-income ratios (DTI).

How Student Loan Forgiveness Could Impact Homebuyers

Student loan forgiveness is a rare opportunity that would free many borrowers from the burden of repaying part or all their federal student loan debt. This beneficial government program could help some millennials put their newly accumulated funds toward saving for a down payment or help potential borrowers lower high debt-to-income ratios and improve their credit. 

Home Affordability is Tougher

Higher home prices and down payment requirements will quickly turn a potential buyer away from buying a home, especially when it comes to millennials. 

For years, the home-to-price income ratio has been much higher than in earlier generations. In 1985, when the average baby boomer reached age 30, a typical single-family home would cost only $82,800. Compared to the average $313,000 home price that a 30-year-old millennial would face in 2019, earlier generations had much easier entrance into the housing market.

Hopeful millennial homebuyers often struggle to afford down payments in the current housing market. For example, the average millennial would have to save every bit of their disposable income for four consecutive years to have enough for a 20% down payment on a median-priced home. 

Millennials Are Marrying Later

Two incomes are often better than one, which is why married couples are more likely to be homeowners. As millennials tend to remain single and opt to marry at a later age, their homeownership chances are stifled due to a singular income stream that isn’t enough to support the purchase of a new home. 

While there is nothing wrong with being single as a lifestyle choice, it often delays millennials’ first home purchase compared to earlier generations that tied the knot much sooner.

Rent is Expensive

The continued climb of high rent prices also hinders a number of millennials from entering the housing market. While renting does not prevent every millennial from buying a home, it makes it increasingly difficult for many to save the money they need to enter the housing market.

Lending Standards Are Stricter

If lenders sense economic instability, lending standards typically become more stringent to reduce the risk of default. This can slow the millennial homeownership rate and makes preparation when applying for mortgages a requirement. Millennials who want to become homeowners should look into preapproval and understand how it differs from prequalification before beginning the mortgage application process. 

Credit Could be Better

Poor credit history and credit scores often negatively impact some millennials’ ability to buy a home. Because millennials came of age during tougher economic circumstances, they may be hesitant to—or incapable of—making larger purchases that would affect their credit. This is especially true when debt is on the table. Previous economic trauma makes it more likely for millennials to use non-credit means of making purchases when they are sure they have the funds available.

But, in order to buy a home, lenders need to see an individual’s credit history to better access risk. If hopeful homeowners have little to no credit (with a high DTI from student loan debt) or exceedingly poor credit, their chances of receiving a home loan are slim. 

Tips For Millennial Home Buyers

With multiple home-buying barriers present, many millennials may think homeownership is out of the cards for them. However, with proper planning, millennials can join other generations and become homeowners. Here are a few things you can do to make homeownership happen: 

  • Pay off your debt. Improving your debt-to-income ratio can help lenders see you as a candidate for a home loan and prepare you for future monthly mortgage payments. If you can, pay off substantial student loans, auto loans, credit cards, or other debt that might be weighing you down. Track your monthly debt payments so you won’t get behind or incur extra interest or fines. If you already have lots of debt, limit credit-paid purchases. 
  • Build your credit. Lenders use creditworthiness to determine whether they want to issue you a home loan. If you haven’t been building your credit, you can start by opening a credit card, making your credit card payments on time, and purchasing items with your credit card that you know you have the funds for. 
  • Save for your down payment. Down payments are important if you want to buy a home. Many need to save money before they have enough to meet a down payment requirement. Millennials who want to become homeowners should save money whenever possible to put it toward a potential down payment and other home-buying costs. If you struggle with saving money, consider creating a budget that suits your financial needs.
  • Know your options. Numerous loan and lender options are available—and they aren’t one size fits all. It’s crucial for millennials who want to purchase their first home to do the research before making any final lender or home loan decisions. If you’re looking for a place to start, MortgageRight’s preapproval program can help you find the right loan option to fit your unique home-buying needs. 
  • Research the housing market. Don’t go into homebuying blind. Learn all you can about the current housing market and predicted market changes before making hard and fast home-buying choices. Brush up on real estate trends so you can make the most informed decision possible.
Millennial Homeownership is Achievable

The rising share of millennial homebuyers proves homeownership is a milestone millennials can achieve if they set themselves up for success and choose the RIGHT lender for their needs. Are you looking for a lender with money-saving programs and expert assistance? We can help! Contact us today to start your home-buying journey!

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Down Payment First-time Homebuyer Government Loans Homebuying Loans Mortgages Purchase

FHA vs. Conventional Loans: How Do They Differ?

What Is an FHA Loan?

An FHA loan is one of multiple government-backed home loan options. This loan type is insured by the Federal Housing Administration, which makes the requirements to qualify less restrictive for homebuyers. FHA loans are a good option for homebuyers with lower credit scores or lower down payment potential. 

What Is a Conventional Loan?

Conventional loans are a mortgage type insured by private lenders. Conventional loans are not government-backed, which means the qualifications are more stringent than those of an FHA loan. Homebuyers typically need a higher credit score and down payment to secure this loan type. 

Fannie Mae & Freddie Mac

Because conventional loans conform to Fannie Mae and Freddie Mac’s standards, they are also known as conforming loans. Fannie Mae & Freddie Mac are the two government-affiliated organizations associated with conventional loans. They purchase mortgages from private lenders and hold the mortgages or convert them into mortgage-backed securities. 

Credit Scores

FHA Loan

Many factors decide the credit score requirements for each loan option. With an FHA loan, a credit score of 580 is typical for you to qualify. A credit score as low as 500 is a possibility for some homebuyers through certain lenders, however, lenders establish their minimum credit score requirement based on risk. When trying to qualify for an FHA loan with a lower credit score, a homebuyer typically needs a higher down payment. The more you’re willing to put down on your home, the lower the credit score required to secure the loan. 

Keep this in mind: If you have a co-borrower, the credit score used to determine eligibility will be the lowest median score. Your middle credit score will be used if you’re borrowing as an individual. 

Conventional Loan 

With conventional loans, qualifying credit scores vary from lender to lender. However, a minimum credit score of 620 or higher is the standard. Like the FHA loan, your median credit score will be used to determine eligibility if you’re borrowing as an individual. If co-borrowers are present, Fannie Mae can make qualification easier by using the average median score of each borrower instead of the lowest median score. 

Keep this in mind: Conventional loan credit score requirements are higher than FHA loans because of the risk associated with loans that don’t have the backing of a government agency.

Down Payments

Conventional Loan 

It might come as a surprise to new homebuyers, but putting 20% down is not always necessary to secure a conventional loan. Down payment expectations are often flexible. However, if you can’t put 20% or more down on your home, you’ll have to pay private mortgage insurance (PMI).

Smaller down payments create a higher risk scenario for lenders, and PMI keeps that risk in check in case you default on your loan. 

FHA Loan

If you opt for an FHA loan, you can put down as little as 3.5% if you have a 580 or higher credit score. If your credit score falls within the 500-579 range, a 10% down payment is required. 

Mortgage Insurance

Conventional Loan 

Conventional loans often come with private mortgage insurance. Private mortgage insurance (PMI) is an assurance fee typically applied to monthly payments if a homebuyer can’t put 20% or more down on the home. 

Though putting down less than 20% on a conventional loan makes paying mortgage insurance more likely, mortgage insurance payments change when you reach 20% equity in your home. When you achieve this equity milestone, you can ask that your lender remove PMI from your mortgage. 

Your PMI payments automatically end once you reach 22% equity based on your original appraised value. As your home value increases, you can request the lender remove PMI if a new appraisal proves the equity is 20% or more of the appraised value. 

With a rate between 0.58% and 1.86% of the conventional loan amount, a portion of your PMI is included in each monthly mortgage payment to prevent you from paying any upfront costs.

FHA Loan 

If you opt for an FHA loan, you’ll receive a mortgage insurance premium (MIP). Unlike private mortgage insurance, MIP is applied no matter your down payment amount.

Alongside an annual MIP payment (which falls between 0.45% and 1.05% of the loan amount), you will need to pay an upfront mortgage insurance premium (UFMIP). UFMIP is 1.75% of the amount you borrow and can either be paid in full at closing or added to your loan amount. 

Generally, MIP can’t be canceled and is a payment that remains for the duration of the loan regardless of equity. However, if you want to get rid of MIP payments, there are other options. When your equity reaches 20% or more, you can refinance your home with a conventional loan and no PMI. 

Which Loan Offers the Best Benefits?

Conventional Loans Benefit Borrowers Who…

  • Have a credit score of at least 620.
  • Have a down payment of 3% or higher; have a down payment of 20% if they want to avoid PMI payments. 
  • Have a low debt-to-income ratio (DTI).

FHA Loans Benefit Borrowers Who…

  • Have a credit score on the lower end. 
  • Don’t have much saved for a down payment. 
  • Have a higher debt-to-income ratio (DTI).
Make Homeownership Happen!

Whether you’re leaning toward a conventional loan, an FHA loan, or are still unsure where you stand—we can help you! Contact us today to have all your mortgage questions answered or to start your home-buying journey!

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First-time Homebuyer Homebuying Homebuying Tips Interest Rates Mortgages Purchase Refinance

Mortgage Rate Locks: Everything You Need to Know

Interest rates are often on the move, which isn’t always great news for homebuyers or current homeowners. Luckily, a mortgage rate lock might help you bypass interest rate ups and downs when you want to make important mortgage decisions!

Mortgage Rate Lock: What Is It?

A mortgage rate lock, or lock-in, is a tool that will stop your interest rate from changing as you navigate the home-buying or refinance process. Your rate lock stays in place if you close within the specified lock period and your application has no changes. 

How Long Can You Lock in a Mortgage Rate?

Rate lock duration varies between lenders, but in most cases, a 30 or 60-day lock period is available. Rate-lock extensions are also a possibility.

Locking in a rate the moment you receive your loan approval is not always a requirement. A lender could allow you to lock your rate in at any time between signing a purchase agreement and closing on your mortgage. The length of the rate lock will affect how much interest you can expect to pay on your loan. 

Keep this in mind: MortgageRight’s Lock & Shop program allows you a 60-day lock period to find the home you want to buy. If you find a home within 60 days, a free 30-day extension will be granted. To start the rate-lock period, you will be charged a $1,500 flat fee to lock the loan. Once the loan is closed, we will issue a $1,500 credit toward your loan’s closing costs.

When to Lock in a Mortgage Rate

Knowing when to lock your mortgage rate can maximize how much you’ll benefit. The best time to get a rate lock will always depend on your financial situation, but you also need to consider the state of the housing market. Locking your interest rate mitigates the risk of interest rate volatility. If interest rates are predicted to rise during your home-buying process, a rate lock could be a worthwhile financial decision. However, if interest rates are likely to lower, getting a rate lock could keep you from saving money in the long term. 

When choosing to purchase or refinance with MortgageRight, you’ll have the opportunity to lock your loan after submitting a valid loan application.

Rate Locks for Homebuyers

When buying a new home, these rate-lock conditions may or may not apply: 

  • If your lender offers a lock-while-you-shop option, you will likely be able to lock your rate as soon as you’re pre-qualified or pre-approved. MortgageRight’s Lock & Shop program offers this option.
  • Borrowers must have a full application and selection of a property if the lender doesn’t offer a lock and shop program.
 Rate Locks for Refinancers

When refinancing, the following may affect how your rate lock is applied:

  • When considering a traditional refinance, ask yourself if the money you will save on your monthly payments will outweigh what you will pay in closing costs and interest on the new loan when the rate you’re attempting to lock is applied. If so, locking the rate might be a good idea. 
Change Can Happen

Even if you’ve managed to land a rate lock, your locked-in rate can still fluctuate if you make disqualifying decisions. Here are a few common reasons your interest rate lock may not be honored:

  • A change in your requested loan type or adjustment of your down payment amount can result in a different locked-in interest rate. 
  • Appraisal matters. If the appraisal on the home you’re buying is higher or lower than expected, your interest rate can change.
  • If your credit score changes, so can your interest rate while under a rate lock. 
  • Income issues can also affect your locked interest rate. 

Keep this in mind: Rate locks are not guaranteed and are subject to underwriting protocols. To secure and maintain a rate lock, you must meet all qualifying guidelines. A rate lock does not serve as a loan approval or commitment to lend from your lender.

Ready to Lock in a New Home?

Homeownership can be tricky in today’s market, but a rate lock can get you into the home of your dreams! Contact us today to get started with our Lock & Shop program!

Categories
First-time Homebuyer Homebuying Loans Mortgages Purchase

Should You Build an Accessory Dwelling Unit?

When the housing market is turbulent, homeowners should strive to make the most of their property. Right now, residential expansion is essential for some homeowners, and accessory dwelling units (ADUs) make branching out worthwhile in more ways than one.

What is an ADU?

An ADU, also known as an accessory dwelling unit, secondary suite, or in-law suite, is an additional living space on a single-family residential lot. Typically small-to-medium in size, ADUs must include their own sleeping, cooking, bathroom, and living space separate from the primary residence. ADUs must also be accessible without disturbing (or entering) the primary residence.

ADUs: The Basics

Can you have an ADU on your property?

ADU installation requires you to obtain the necessary permits and your residence to meet certain legal conditions, so you should ensure your property qualifies before you begin building. 

Individual areas have different regulations for ADUs, and knowing those rules is essential. Size, proximity to the primary residence, and other factors vary by location. It’s also possible that your area does not permit ADUs to be placed on residential property at all. Check with your local government to obtain proper permits. Most counties in the nation will typically allow you to install an ADU if it meets the standards set by the city.

Homeowners who are a part of an HOA (homeowners association) may also have additional regulations they must abide by when adding an ADU. Before moving ahead with the project, be sure to review your HOA guidelines. 

Any unpermitted ADU could cause complications when it comes time to sell your home. To avoid future expenses, know if your residence meets the ADU requirements in your location before you build!

How do you build an ADU?

As previously mentioned, all ADUs must be considered independent living spaces suitable for year-round occupancy. ADUs can only meet this requirement by including a separate entrance, a bedroom, a bathroom, and a kitchen (with appliances). The space must also have electrical, gas, plumbing, heating, ventilation, and air conditioning (HVAC) systems. 

Attached ADUs typically share gas, electrical, plumbing, and HVAC systems with the primary residence, but this is not a requirement.

If you’re considering a detached unit or are unsure how to go about the project, it might be best to contact a trusted contractor to help you plan and build your ADU. 

How much does an ADU cost?

The cost of an ADU varies between locations. The type and size of the dwelling also factor into the price. According to HomeAdvisor estimates, the more separate space between the ADU and the primary residence, the more expensive the ADU will be. Converting existing internal spaces will typically cost $10,000 – $30,000; ADUs attached to the primary residence often cost $40,000 – $125,000, and a stand-alone structure might have a price tag of $100,000 and up. 

Luckily, if you don’t have the cash on hand to cover these costs on your own, an ADU is still a possibility.

How do you finance an ADU?

There are multiple ways to finance an ADU project:

  • Utilize your home equity – If you have equity built up in your home, you can opt for a cash-out refinance, home equity line of credit (HELOC), or home equity loan to pay for an ADU expansion or other home improvement projects. 
  • Try renovation or HomeReady loans – Our HomeStyle Renovation and HomeReady loan programs target ADU-specific renovation projects. Borrowers looking to purchase or refinance a 1-unit property and construct or install a new ADU can use our HomeStyle Renovation loan to finance it. Borrowers purchasing or refinancing a home with an existing ADU who qualify for a HomeReady Loan can include rental income to help them qualify for the loan.
  • Go your own way – Taking out personal loans or putting home-improvement expenses on a credit card are viable options—but only if you’re consistent with making payments. 
How much value does an ADU add?

ADUs are incredibly valuable for those with larger families who need more space on their property. ADUs could provide a more pleasant living experience for multigenerational families and families who have older children that want a little more independence or kids who are moving back in.

The biggest benefit of building an ADU is the potential increase in your home’s property value. Generally, a home with an ADU has 20% – 35% more value than a home that does not have one, and you can pocket that much more when you sell your home. In many cases, an ADU can be a winning investment. 

Keep this in mind: MortgageRight’s ADU lending program does not allow the unit to be used as an investment rental.

Ready to Expand?

Are you thinking of adding an ADU to your home? We can help you out! Contact us here to make the most of homeownership!

Categories
First-time Homebuyer Homebuying Homebuying Tips Loans Mortgages Pre-approval

How to Apply for a Mortgage

Want to take on homeownership? Great! Found a home that’s RIGHT for you? Even better! Now you need to apply for financing. Don’t sweat it—here’s a helpful breakdown of everything you need to apply for a mortgage loan. 

What to do before applying

Do your research

Before you move into the mortgage application process, you must make sure you pick the lender that is RIGHT for you. A mortgage is a relatively long-term commitment, so a healthy borrower-lender relationship is crucial! Do your research and choose a lender that best suits your needs. 

Consider your credit score

Your credit score plays a vital role in mortgage approval. As you begin the mortgage application process, check the condition of your credit reports and scores. Acceptable minimum credit scores vary for prospective mortgage applicants, but having a FICO score of 620 or more is a good starting point. 

Find the right mortgage type

Every homebuyer is unique. So, to ensure borrower satisfaction, lenders offer several mortgage types to meet different needs. When researching mortgage offerings, you’ll encounter government-backed mortgages, varied loan terms, and multiple mortgage rate options. The most important thing is to seek the best mortgage type for your homeownership goals.

Gather your documents

To make it past the mortgage application process, you’ll need to prove that your lender can trust you to repay a sizable loan amount. This is where documentation comes in. These documents will establish your income stability, assets, creditworthiness, and your financial obligations and debts:

  • Driver’s license and Social Security card
  • Paystubs for every job held (most recent 30 days)
  • W-2s and/or 1099s for the last two years
  • Your last two years of tax returns (complete and signed)
  • Most recent 2 months’ bank statements 
  • Alimony or child support documents.
  • Other situational information (e.g., bankruptcy/foreclosure documents, divorce decree, armed services documents, etc.)

Have these documents on hand before starting the application process. 

How a successful mortgage application process works
  • Get pre-approved
  • Fill out the application
  • Begin loan processing
  • Enter the underwriting phase
  • Clear-to-close

Step 1: Get pre-approved

Getting pre-approved is one of the most important steps in the mortgage process. It not only lets you know how much house you can afford but also gives you a leg-up over other potential homebuyers when bidding on a home. 

When you get pre-approved, your lender will provide you with a pre-approval letter. This official document typically includes the loan amount, down payment amount, expiration date, and more. 

Keep this in mind: You can get pre-approved even if you haven’t started searching for a home with our unique pre-approval program. Learn more about our Upfront Underwriting option.

Step 2: Fill out the application

Now that you’ve made all the necessary preparations to begin the mortgage process, it’s time to fill out your application! If you already have a home in mind that you want to buy, great! If not, you can still fill out a mortgage application to see where you stand in the eyes of your chosen lender. 

After submitting your complete mortgage application, a lender will pull your credit. By law, a lender has up to three business days after receiving your application to issue you a Loan Estimate form. This form is a detailed disclosure that shows the loan amount, type, interest rate, and all mortgage costs, including mortgage insurance, hazard insurance, closing costs, and property tax. 

Step 3: Begin loan processing

In this stage, mortgage loan processors carefully review all information submitted with your mortgage application. All employment, tax, and other claims are verified at this time. You may receive questions and document requests from your lender during the processing phase—but don’t worry! A prompt response to your lender will keep things moving forward. 

Step 4: Enter the underwriting phase

You’ve almost reached the finish line at this stage—so sit tight! You typically won’t be contacted during the underwriting phase, but if you are, it will be to answer a few more questions and provide more documents. 

Underwriters will be working diligently to assess delinquency risk and your ability to repay the mortgage loan you’re seeking. 

Step 5: Clear-to-close

It’s time to get those keys in hand! To conclude the mortgage process, you will meet with your lender to sign the final documentation. And voila! You’re officially a homeowner.

Keep this in mind: Don’t forget to use this closing session to ask any last-minute questions you may have about your loan.

How long does the entire process take?

The time it takes to reach the end of the mortgage process differs for everyone. The mortgage application-to-closing process can take anywhere from 15 days to several months, depending on the proficiency of the lender you choose, the condition of the housing market, and your personal circumstances.

Get started!

Whether you’re still in the applying phase or a little further on your home-buying journey, you can trust us to satisfy your homeownership needs! If you’re looking to purchase a new home, refinance the one you own, or have any questions, contact us here to learn more. 

Categories
Budgeting Credit Down Payment Homebuying Homebuying Tips Mortgages Purchase Refinance

5 Ways to Get the Best Mortgage

One of the most important things to do when getting a mortgage is to ensure the mortgage you choose fits all your home-buying requirements. It’s possible to get the right interest rate, monthly payment amount, and more! You simply need to make the most of available mortgage options, and put your best foot forward where your finances are concerned. Here’s how you can get the best mortgage for your needs. 

Improve your credit score.

No matter which loan you choose, better mortgage rates tend to come to borrowers with higher credit scores. To lenders, your credit score is a risk assessment tool. Typically, the lower your credit score, the riskier it is to lend to you. Borrowers with a low credit score are more likely to default on a loan or fail to meet contractual obligations. This leads lenders to charge higher interest rates to applicants with lower credit scores.

If your credit score is preventing you from buying the perfect home, these tips will help you improve it:

  • Be consistent with payments – On-time debt payment is the number one way to raise your credit score. If you have trouble making payments on time, consider using automatic payment systems. 
  • Consider paying your debts off early – Paying down certain debt before it’s due or making more payments a month than required can also benefit your credit score. Going this route can also decrease your debt-to-income ratio.

Need more help increasing your credit score? Download our FREE Credit Repair Guide.

Choose your loan term carefully.

Short-term loans

Short-term mortgage loans are those that are shorter than the typical 30-year term. Risk is less of an issue with short-term loans, so they typically come with lower mortgage rates. Short-term loans also tend to save borrowers more money over time. However, because you’ll be paying the principal for a shorter amount of time, your monthly payments will be higher.

This loan option is less suitable for borrowers who fall into a lower income bracket, don’t have enough savings to offset higher monthly payments, or are less financially stable. If you’re adamant about a lower mortgage interest rate and can handle higher mortgage payments, a short-term loan might be your best bet.

Long-term loans

Long-term loans are the most common and are typically a 30-year term. These loans allow you to spread your payments over a longer period of time, which will lower monthly mortgage payments and leave you with more disposable income each month than a short-term loan would.

 Make a larger down payment.

The more money you put down on your home, the less you will owe on the mortgage loan. If you make a larger down payment, you can build more equity in your home from the start. Because interest is calculated from the principal, larger down payments also open the door for lower interest costs over the life of the loan.

A borrower’s inability to put down a significant amount on a home could make lenders view their loan as riskier than those who put more money down. In this case, less money down can result in a higher interest rate. 

Keep this in mind: A sizable down payment has its perks, but some loans don’t require a large (or any) down payment at all! FHA and VA loans are excellent mortgage options for those that qualify and want to put less money down.

Remember rate locks.

Rate locks are a great way to potentially avoid rate changes before you close on your home loan. Our Lock & Shop program preapproves a borrower’s budget ahead of time and applies a 60-day interest-rate lock before they start shopping for a home. Lock & Shop is available for all conforming Conventional, VA, FHA, and USDA loans.

Keep this in mind: Like most rate-lock options, borrowers do have to pay an upfront fee to access our program. To learn more, reach out to your closest branch here.

Want to change your mortgage? Refinance!

If you’ve already purchased your home but you’re unsatisfied with your current loan, refinancing is an option! Renegotiating the terms of your mortgage can save you money over the new course of the loan. There are many available refinancing options, each with its own advantages and drawbacks. 

Here are a few ways a refinance can benefit you:

  • If you have an adjustable-rate mortgage and interest rates are on an upward trend, you can benefit by refinancing to a fixed-rate mortgage. 
  • Sometimes expenses pop up, and you need cash to pay for them. If you have enough equity built up in your home, you can use a cash-out refinance to get a lump sum and pay for anything that needs funding.
  • Many borrowers improve their financial situation over time, so it is possible for you to renegotiate a fixed-rate mortgage to a lower rate if you have a better credit score or if rates have decreased since you initially closed on your loan.
Make sure your mortgage is RIGHT for you!

Landing the right mortgage can make or break your home-buying experience, so we want to help you make the best mortgage decision you can! Reach out today to get started on your home-buying journey. 

Categories
Budgeting Government Loans Homebuying Loans Mortgages

Is a Reverse Mortgage Right for You?

Have you ever wondered if you could buy a home and pay nothing on the mortgage while you’re living there? It might sound too good to be true, but a reverse mortgage is a real home-buying option—and it might be the right one for you!

What is a reverse mortgage?

A reverse mortgage is similar to a traditional home loan because it allows homebuyers to borrow money using their home as collateral. However, a reverse mortgage doesn’t require the borrower to make monthly mortgage payments. Instead, the borrower may receive monthly payments from the lender. 

Something to consider: There are multiple ways to receive and utilize the funds from a reverse mortgage. A borrower can pay off a current mortgage or lien, receive a lump sum, a line of credit, monthly payments, or a combination of all 3. The borrower must also pay the loan in full when they no longer live in the home. 

Home Equity Conversion Mortgage (HECM)

A HECM is the most common type of reverse mortgage. It is a specialized home loan issued by Federal Housing Administration (FHA)-approved lenders. Because a HECM is a government-backed, non-recourse loan, you will never owe more than what the home is worth. You can also spend the funds on anything.

Requirements

Homeowners who opt for a reverse mortgage should be aware of the following:

  • Homeowners must be at least 62 years old.  
  • Homeowners are required to pay property taxes and homeowners insurance.
  • Homeowners must use the property as their primary residence.
  • Homeowners must keep the home in good condition. 

Something to consider: The amount a homeowner owes the lender when they no longer occupy the home will go up over time because interest accrues monthly. 

How much will you receive monthly?

If your lender is paying you, where is the money coming from? When you get a reverse mortgage, the monthly payments you receive come from the equity you have in your home.

To decide how much you’ll receive monthly, your lender will order an appraisal of your home. They will then use the appraisal value, age, and available interest rate to determine the loan and monthly payment amount.

How do you pay back a reverse mortgage?

When you decide to sell your home, that money goes toward repaying your reverse mortgage and interest. This means you won’t profit as much from the sale as you might with a traditional mortgage. Why? Because the interest accruing each month adds to your principal balance. 

Something to consider: Even though you’re not required to repay your mortgage until you sell your home, pass away, or no longer live on the property, you can still choose to make regular payments on your home.

What if the homeowner passes away? 

The property becomes the beneficiary’s responsibility if the homeowner passes away before the home is sold. If the beneficiary wants to keep the home, they can either purchase it for the amount owed on the reverse mortgage (or 95% of the appraised value) or refinance to a traditional mortgage loan. The beneficiary may also sell the home and pay off the reverse mortgage.

Who benefits most from reverse mortgages?

Reverse mortgages let homeowners of retirement age take advantage of their home’s value sooner than with a traditional loan. It also helps them lower or eliminates their monthly mortgage payments and better cover their expenses.

However, some older homeowners could benefit more than others. You’re more likely to make the most of a reverse mortgage if you fit the following criteria:

  • Your home value is on the increase – If you have a lot of equity built up in your home, you may still have money left over when you take out a reverse mortgage. 
  • You plan to live in your home long-term – Like a traditional mortgage, there are upfront costs associated with a reverse mortgage. Planning to stay in the home long-term will make taking on those costs worthwhile. 
  • You can cover home costs – Because a reverse mortgage requires you to keep property taxes, insurance, maintenance, and other payments up to date, it’s essential to have enough funds on hand to cover these expenses. 
Should you get a reverse mortgage?

A reverse mortgage isn’t for everyone, but it could be the mortgage option that helps you achieve a financially fulfilling retirement. If you want to learn more about reverse mortgages, or you’re ready to make another home-buying decision—we’re the RIGHT people to call! Click here to get started.